Opinion
00-CV-0167E(F).
November 8, 2000
Laurence D. Behr, Esq., For Plaintiff.
Jonathan A. Mugel, Esq., Adam Goodman, Esq., and Peter F. Lovato, III, Esq., For Defendant.
MEMORANDUM and ORDER
Cattaraugus County Project Head Start, Inc. and Ira Katzenstein, its Executive Director (collectively "Head Start") were accused of employment discrimination by Christine Rubick, who filed a charge with the Equal Employment Opportunity Commission March 19, 1999. Head Start thereafter filed a claim with the insurance company, Executive Risk Indemnity, Inc. ("Executive Risk"), which denied coverage in a letter dated April 2, 1999. Compl. Ex. D. Rubick subsequently filed a complaint against Head Start in this Court January 14, 2000. Head Start therefore brought this action against Executive Risk February 17, 2000 pursuant to the Declaratory Judgment Act — 28 U.S.C. § 2201-2202 — for a declaration that Executive Risk has a duty to defend and indemnify it against the claim filed by Rubick. In its answer filed May 3, 2000 Executive Risk raised six affirmative defenses. Head Start filed a motion under Rule 12(f) of the Federal Rules of Civil Procedure ("FRCvP") to strike all of the affirmative defenses on the basis that they are "insufficient under [FRCvP] 8(c), because they fail to include a short and plain statement of facts upon which the defense is based, and fail to allege the necessary elements of the defense ***." Notice of Motion at 1-2. In its motion, Head Start also requested that ¶ 15 of Executive Risk's Answer — relating to the performance of a condition precedent — be struck on the basis that it is insufficiently pled pursuant to FRCvP 9(c) because it is not made with requisite specificity and particularity. Finally Head Start has requested that sanctions, including attorney fees, be imposed under FRCvP 11 because of Executive Risk's "bad faith and frivolous conduct" in raising and refusing to withdraw its affirmative defenses. Pl.'s Reply Mem. of law at 8. Presently before the Court is Head Start's motion to strike all of the affirmative defenses and ¶ 15 of the answer, and for sanctions.
(1) Plaintiffs' recovery is barred by the doctrine of unclean hands. (2) Plaintiffs' recovery is barred by the public policy of the State of New York, insofar as Plaintiffs concealed material facts on an insurance application. (3) Plaintiffs' recovery is barred by the doctrine of estoppel. (4) The policy issued by EXECUTIVE RISK confers rights and obligations upon the parties only pursuant to, in accordance with, and as limited by, the terms, conditions, definitions, exclusions and limits of liability provided therein. (5) The complaint fails to state the terms and conditions of any Policy of insurance issued by EXECUTIVE RISK that would impose any obligations upon this Defendant in connection with the incidents, claims and proceedings set forth in the Complaint. (6) EXECUTIVE RISK reserves the right to amend this Answer and to raise any additional defenses that become apparent during discovery proceedings in this matter and after further review of the Policy. Answer ¶¶ 18-23.
As a preliminary matter, Executive Risk has objected to Head Start's motion to strike the affirmative defenses on the ground that it is untimely and to the motion for sanctions on the ground that it was brought as part of the motion to strike. Mem. of Law in Opp. To Pl.'s Mot. at 6, 12. Pursuant to FRCvP 12(f) a motion to strike affirmative defenses must be filed not later than twenty days after the answer is served. The answer was filed May 3 and Head Start did not file its motion to strike until June 13; therefore it is untimely. However, because a court can strike an affirmative defense at any time upon its own initiative, several courts have held that they may consider untimely motions to strike. Saratoga Harness Racing Inc. v. Veneglia, No. 94-CV-1400, 1997 WL 136946, at *4 (S.D.N.Y. Mar. 18, 1997). FRCvP 11(c)(1)(A) states that a "motion for sanctions shall be made separately from other motions or requests" and Head Start has brought its motion for sanctions as part of its motion to strike. While Head Start has not complied with the proper procedure, the undersigned has reviewed the motion for sanctions and, inasmuch as it will be denied, Executive Risk will suffer no prejudice from its consideration. The Court will therefore address Head Start's motion to strike — although it is not only untimely, but also fails to comply with this Court's Local Rule of Civil Procedure 7.1(e) in that it was not accompanied by a memorandum of law.
In the Second Circuit, motions to strike affirmative defenses under FRCvP 12(f) for being legally insufficient are disfavored, and will only be granted if it "appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense." William Z. Salcer, Etc. v. Envicon Equities, 744 F.2d 935, 939 (2d Cir. 1984), vacated on other grounds and remanded, 478 U.S. 1015 (1986). Even where the facts are not in dispute, a motion to strike an affirmative defense should not be used to determine disputed and substantial questions of law, especially when there has not been a chance for significant discovery. Salcer, at 939. If the affirmative defense raises a purely legal issue that is disputed or substantial, it should still not be decided on a motion to strike; rather the decision should be made only after discovery and a hearing on the merits have occurred to alleviate the danger of "offering an advisory opinion on an abstract and hypothetical set of facts." Ibid.
"In order to succeed on a motion to strike affirmative defenses a plaintiff must establish three elements: (1) that there is no question of fact which would allow the defense to succeed; (2) that there is no question of law which would allow the defense to succeed; and (3) that the plaintiff would suffer prejudice from inclusion of the defense." Saratoga, at *3
As noted by the court in Habiniak v. Rensselaer City Mun. Corp., and equally applicable to the present situation "none of the affirmative defenses appears unusually vague, confusing, or legally bizarre; nor do they contain substantially less information than the overwhelming majority of affirmative defenses that parties in defensive postures typically file with this Court." 919 F. Supp. 97, 100 (N.D.N.Y. 1996).
The first three affirmative defenses are of an equitable nature — viz., (1) unclean hands, (2) public policy and (3) estoppel. While Head Start claims it cannot ascertain the factual basis for these defenses, it is clear on the face of the papers submitted that they are based on the Executive Risk's allegation that Head Start was aware of the claim by Rubick before the effective date of the insurance policy and failed to disclose it. Compl. Ex. D (Coverage Denial Letter). The relief sought by Head Start is under the Declaratory Judgement Act — 28 U.S.C. § 2201-2202 — and the "granting of declaratory relief is governed by equitable principles, and within the sound discretion of the reviewing court." Holup v. Gates, 544 F.2d 82, 85 n. 3 (2d Cir. 1976). Insofar as Head Start seeks declaratory judgment — an equitable remedy — the Court cannot hold as a matter of law based on the pleadings that there are no questions of fact or law which would allow these equitable affirmative defenses to succeed, or that the plaintiff would suffer prejudice from their inclusion. Salcer, at 939; Saratoga, at *3 Head Start specifically objects to the failure of Executive Risk to specify the particular type of estoppel raised, relying on D.S. America (East) v. Chromagrafx Imaging Systems, 873 F. Supp. 786, 797-798 (E.D.N.Y 1995) (citing Teletronics Propriety, Ltd. v. Medtronic Inc., 687 F. Supp. 832, 841 (S.D.N.Y 1988)) holding that pleading unclean hands and estoppel without more is insufficient; however, the courts in those cases did not — for some unknown reason — apply the rule of the Second Circuit as stated in Salcer, nor did they even mention it in their decisions. The affirmative defense of estoppel is akin to that of the statute of limitations; however the Second Circuit Court of Appeals has ruled that the identification of the particular statute of limitations upon which the defendant relies is not required, and indeed the statute of limitations defense is sufficiently raised under FRCvP 8 by its mere assertion. Santos v. District Council of New York City, Etc., 619 F.2d 963, 967 (2d Cir. 1980). This Court therefore holds that the first three affirmative defenses have been adequately pled and Head Start's motion to strike such will be denied.
Internal citations omitted.
The fourth and fifth affirmative defenses, are in essence affirmative defenses based on failure to state a cause of action, because any liability on the part of Executive Risk to Head Start would emanate from the insurance policy. Including failure to state a claim as an affirmative defense is a "routine practice which is rarely, if ever, stricken by the court as legally insufficient" and, indeed, is often considered "invulnerable as against the motion." Almy Brothers Inc. v. McMahon, 971 F. Supp. 69, 72 (N.D.N.Y 1997). There are clearly legal and factual issues which could allow these defenses to succeed as they concern the very issue to be decided — i.e., whether the insurance policy requires Executive Risk to defend and indemnify Head Start from the claims made by Rubick. Also, Head Start cannot claim prejudice by their inclusion because Head Start will have to present proof on these issues to establish its cause of action. The motion to strike the fourth and fifth affirmative defenses will therefore be denied.
Internal citations and quotation marks omitted.
The sixth affirmative defense is simply a reservation of rights clause and — regardless of whether or not such is proper — it cannot be said that Head Start is somehow prejudiced by its inclusion, as no action in response to such is required. Insofar as one of the required elements to succeed on a motion to strike an affirmative defense is that the plaintiff would suffer prejudice from the inclusion of the defense and as this element has not been established, the motion to strike the sixth affirmative defense will be denied.
Head Start has also alleged that ¶ 15 of Executive Risk's Answer violated FRCvP 9(c) which requires that a "denial of performance or occurrence shall be made specifically and with particularity," and should therefore be stricken. In ¶ 15 Executive Risk stated that it "[d]enies knowledge or information sufficient to form a belief as to whether or not Plaintiffs have satisfied the condition precedent in the Policy of exhaustion of the retention ***." Head Start states that this is a "glaring violation of the clear mandate" of FRCvP 8(c). Pl.'s Reply Mem. of Law at 5. Executive Risk, however, has not violated FRCvP 8(c) because it has not even denied the performance of the conditions precedent to the effectuation of the insurance policy, it simply states that at this point — with no discovery having been had — it cannot determine whether or not Head Start has complied with all of the conditions precedent. Therefore ¶ 15 of the answer will not be stricken.
Finally, Head Start has moved that sanctions, including attorney fees, be imposed against Executive Risk on the basis that it "alleged patently irrelevant and insufficient affirmative defenses ***." Pl.'s Reply Mem. of Law at 7-8. In that this Court has found no reason to strike the affirmative defenses of Executive Risk, it will not sanction Executive Risk for raising such defenses. Head Start's motion for sanctions will therefore be denied.
Accordingly it is ORDERED that Head Start's motion to dismiss the affirmative defenses and ¶ 15 of Executive Risk's Answer and for sanctions is denied.